Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

California Constitutional Provisions

ARTICLE XIII Revenue and Taxation

Section 26

Sec. 26. Income tax. (a) Taxes on or measured by income may be imposed on persons, corporations, or other entities as prescribed by law.

(b) Interest on bonds issued by the State or a local government in the State is exempt from taxes on income.

(c) Income of a nonprofit educational institution of collegiate grade within the State of California is exempt from taxes on or measured by income if both of the following conditions are met:

(1) The income is not unrelated business income as defined by the Legislature.

(2) The income is used exclusively for educational purposes.

(d) A nonprofit organization that is exempted from taxation by Chapter 4 (commencing with Section 23701) of Part 11 of Division 2 of the Revenue and Taxation Code or Subchapter F (commencing with Section 501) of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, or the successor of either, is exempt from any business license tax or fee measured by income or gross receipts that is levied by a county or city, whether charter or general law, a city and county, a school district, a special district, or any other local agency.

History.—The amendment of June 7, 1994, added "both the . . . met" after "if", created new paragraphs with paragraphs (1) and (2); substituted "The income" for "it" after "(1)" and substituted a period for ", and" after "Legislature" in paragraph (1), and substituted "The income" for "it" after "(2)" in paragraph (2) of subdivision (c); and added subdivision (d).

Construction.—A fee imposed on nonprofit organizations by a county based upon a percentage of their gross receipts earned from bingo games violated subdivision (d) of this section. Arden Carmichael, Inc. v. Sacramento County, 79 Cal.App.4th 1070. Subdivision (d) does not exempt nonprofit organizations from all business license taxes or fees, only from those measured by income or gross receipts. Bingo prize payouts are not income but are an expense to the organization that is deducted from gross receipts, and a fee based on that expense is not a prohibited fee measured by income or gross receipts under the subdivision. Arden Carmichael, Inc. v. Sacramento County, 93 Cal.App.4th 507.

Decisions Under Former Article XIII, Section 11.

Legislative power.—This section gives the Legislature the power in taxing income derived from wagering transactions to disallow any deduction for losses sustained in defined illegal activities. Hetzel v. Franchise Tax Board, 161 Cal.App.2d 224.